Russell Roberts's Blog, page 1446

Speaking in Israel

I will be speaking at a conference this Sunday in Jerusalem sponsored by the Jerusalem Institute for Market Studies. More info here if you're in the neighborhood and would like to attend.

Bill "Chicken Little" McKibben

Writing in today's Washington Post, Bill McKibben blames deadly recent weather events on climate change.  And he snarkily dismisses as naive the argument that humankind can adapt well to such change.

Let's look at data from the National Weather Service on annual fatalities in the U.S. caused by tornados, floods, and hurricanes from 1940 through 2009.  Naturally, these data show that the number of such fatalities varies from year to year.  For example, in 1972 the number of persons killed by these weather events was 703 while in 1988 the number was 72.  On average, however, the trend is clear and encouraging: the number of such fatalities, especially since 1980, is declining.

The average annual number of such fatalities over this entire 70-year span is 248.  In each of the four decades prior to 1980, the average annual number of fatalities was higher than 248; in particular:

1940-49: 272

1950-59: 308

1960-69: 282

1970-79: 296

The average annual number of such fatalities over the full 40 years 1940-1979 was 290.

But in each of the three decades starting in 1980, the average annual number of fatalities caused by tornados, floods, and hurricanes was lower than 248; in particular:

1980-89: 173

1990-99: 171

2000-09: 238

The average annual number of such fatalities over the full 30 years 1980-2009 was 194.  (This number falls to 160 – just over half of the 1940-79 number of 290 – if we exclude the deaths attributed to hurricane Katrina, the great majority of which were caused by a levee that breached a day after the storm passed.)

This decline in the absolute number of deaths caused by tornados, floods, and hurricanes is even more impressive considering that U.S. population more than doubled over these 70 years, from 132 million in 1940 to 308 million today.

Seems that McKibben's apocalyptic prognostications about humanity's future are as fact-based as are those of the Rev. Harold Camping.

Paving the Road to Hell

Dear Ms. __________:

Thanks for your e-mailed response to my blog-post in which I claim that compassion compelled by government isn't true compassion.  Alleging that I "illegitimately privilege private morals over public morals," you assert that a "private code of ethics gives incomplete guidance" for determining the contents and methods of sound public policy.

Omigosh, I couldn't disagree more.

Where do the "public morals" that you so admire come from?  Isn't it true that the very reason you support the welfare state is that your own private moral code tells you that helping needy people is the right thing to do?  I don't see how you can casually cast aside one "private moral" (namely, that it's wrong to take other people's stuff just because you fancy that you've found better uses for it) in order to clear your way to justify the state acting to satisfy another of your private morals (namely, that it's right for those of us who 'have' to give to people who 'have not').

I urge you to reflect on the following observation from Thomas Babington Macaulay's History of England, where he explains how John Dalrymple could in good conscience advise King William III to massacre Scottish highlanders who were believed to support insurrection against William:

The most probable conjecture is that he was actuated by an inordinate, an unscrupulous, a remorseless zeal for what seemed to him to be the interest of the state.  This explanation may startle those who have not considered how large a proportion of the blackest crimes recorded in history is to be ascribed to ill regulated public spirit.  We daily see men do for their party, for their sect, for their country, for their favourite schemes of political and social reform, what they would not do to enrich or to avenge themselves.  At a temptation directly addressed to our private cupidity or to our private animosity, whatever virtue we have takes the alarm.  But virtue itself may contribute to the fall of him who imagines that it is in his power, by violating some general rule of morality, to confer an important benefit on a church, on a commonwealth, on mankind.  He silences the remonstrances of conscience, and hardens his heart against the most touching spectacles of misery, by repeating to himself that his interventions are pure, that his objects are noble, that he is doing a little evil for the sake of a great good.  By degrees he comes altogether to forget the turpitude of the means in the excellence of the end, and at length perpetrates without one internal twinge acts which would shock a buccaneer.*

Sincerely,

Donald J. Boudreaux

* Thomas Babington Macaulay, The History of England (1848-61), abridged edition, Hugh Trevor-Roper, editor (New York: Penguin Books, 1968), p. 418.

Gabler Needs Some Scottish Enlightenment

Here's a letter to the Los Angeles Times:

Discussing the past 30 years, Neal Gabler asserts that "Conservatives are pushing aside compassion" ("America the stony-hearted," May 22).  In doing so, though, he simply assumes his conclusion – namely, that a people's compassion is expressed only, or at least chiefly or best, through government programs and regulations.

Conservatives (or, more accurately here, skeptics of the welfare state) argue that government programs, because these rely upon taxation and force, are not the product of a people's compassion.  These are instead the product of force-backed greed masquerading as compassion (Ever reflect on why the Food Stamp program is run by the Department of Agriculture, or why labor unions oppose free trade?), as well as of the wide acceptance of the myth that society and state are synonymous with each other.

We welfare-state skeptics perhaps are wrong to argue that true compassion can be expressed only when done voluntarily and that, when compassion is done voluntarily, it's more effective than is 'compassion' compelled by government commands.  But Mr. Gabler certainly is wrong to write as if the argument on this front is settled in favor of those who suppose that a people's compassion can be expressed only through the state.

Sincerely,

Donald J. Boudreaux

Some Links

Scott Lincicome exposes the errors in Robert Lighthizer's portrayal of the politics of protectionism.

William Anderson uses the great Henry Hazlitt to highlight some weaknesses in Mr. Paul Krugman's economics (as opposed to the economics of Dr. Paul Krugman).

Arnold Kling on innovation and Tyler Cowen's thesis of "the great stagnation."

What happened to the alleged inexhaustible pool of low-wage workers in China and India?!

Here's the Boston Globe's Jeff Jacoby at his best.

Steven Hayward identifies some dangers of true-believing environmentalists.

Is the media biased in its coverage of gasoline-price hikes? (HT Walter Williams)

Finally, I discuss with Judge Napolitano how monopoly protection keeps K-12 public schools in the U.S. lousy.

Bennis v. Michigan and the Awful Advance of Civil Asset Forfeiture

Fifteen years ago, Adam Pritchard (now a law professor at the University of Michigan) and I had the following op-ed published in the March 15, 1996, edition of the Washington Times:

Would you like to forfeit your house?

March 15, 1996

Section: A COMMENTARY OP-ED

Edition: 2

Page: A21

Byline: By Donald J. Boudreaux and A.C. Pritchard

Imagine a guest with a marijuana cigarette secretly tucked in his pocket visits your house. The police storm in, seize the cigarette, and arrest your guest for drug possession. The police then announce that the government now owns your house.  "What?!" you wail, "I did nothing wrong. How can you take my house?"

.

You are told that civil-forfeiture law allows government to take property that harbored an "abatable nuisance" – illegal drugs, in this case. An officer explains that "Your house, not you, committed a wrong. To help stem drug trafficking, it must be seized. Your doubts about our ability to confiscate your property will be dispelled by reading the Supreme Court's March 4th decision in Bennis vs. Michigan."

.

Certain that such tyranny is impossible in America, you rush to read Bennis. Your heart sinks. Chief Justice Rehnquist explains that the Constitution permits Michigan to use civil forfeiture to strip Tina Bennis of her ownership of an automobile in which her husband John had a tryst with a prostitute. Civil forfeiture allows government to take property from someone without convicting that someone of a crime.

.

Everyone concedes that Mrs. Bennis was unaware that John used the car for illegal sex – for which he was convicted and fined $250. Still, according to the Court, Michigan violated neither the Due Process nor the Takings clauses of the Constitution by taking the innocent Mrs. Bennis' property without as much as a "thankee, ma'am." The court reasoned that the state's confiscation and forfeiture of Mrs. Bennis' car is constitutional because courts have long upheld civil-forfeiture seizures of some properties.  But these were historically confined to properties whose owners could not be tried in domestic courts. Not until Prohibition – long after the Constitution was adopted – did government generally wield civil forfeiture against people who could easily be criminally prosecuted.

.

Traditionally, no one can be punished unless first convicted. And government cannot convict someone – nor forfeit his property – who is denied an opportunity to defend himself before an impartial jury. But what to do about criminals outside of a domestic court's jurisdiction? This was a pressing question for courts in cases involving smuggled goods as well as ships used for smuggling or piracy on the high seas. Owners of these properties were typically outside of domestic jurisdiction. Unless the law found a practical way to punish these foreign owners, smuggling and piracy would continue unabated.

.

Civil forfeiture solved the problem of unreachable wrongdoers. Under civil-forfeiture law, a court declared the property itself to be the wrongdoer. This legal fiction allowed the court to bypass the requirement of convicting the foreign wrongdoer before punishing him. Courts realized that the threat of civil forfeiture made foreign shipowners more reluctant to use their properties wrongfully. Civil forfeiture began here – and here is where it remained until after the Civil War. After the Civil War, civil forfeiture was expanded only far enough to reach property used to evade liquor taxation. Fact is, forfeiture of the properties of domestic citizens did not become widespread until Prohibition, when it was used to punish bootleggers smuggling alcohol.

.

When the Constitution was adopted, the common law did not condone using civil forfeiture against domestic citizens; therefore, use of civil forfeiture to seize the Bennis automobile is not permitted by the Constitution today. The Bennis criminals – Mr. Bennis and the prostitute – were within Michigan's jurisdiction, and thus, outside the realm of civil forfeiture.

.

The Constitution does permit civil-forfeiture seizures of aircraft and similar properties belonging to the likes of Colombian drug lords. Such criminals are precisely the kinds of wrongdoers that civil forfeiture was meant to punish. But by upholding civil forfeiture in cases for which the government can easily prosecute suspected criminals in person – such as in the Bennis ruling – the court unleashes a government power unknown to America's founding generation.

.

The Bennis decision frees government to impose huge costs on people never charged with criminal wrongdoing. Governments will respond to this novel constitutional loophole by devising ever more creative ways of preying upon innocent citizens as sources of revenue. A Supreme Court committed to respect legal precedent poorly serves judicial restraint and justice by so carelessly interpreting the tradition it seeks to protect.

.

Oliver Wendell Holmes observed that "hard cases make bad law." For Tina Bennis, bad history makes hard law.

.

Donald J. Boudreaux is Visiting Olin Scholar in Law and Economics at the Cornell Law School. A.C. Pritchard practices law in the Washington office of Bickel & Brewer

Repulsive Government

There is no more offensive, repulsive, inexcusable, and tyrannical government operation routinely undertaken in today's US of A than civil asset forfeiture.  It's criminal.  (HT EconLog's David Henderson)

Another for the 'I Miss Julian Simon' File

Here's a letter to the Los Angeles Times:

I write this letter mere hours before – if the prediction of a small sect of Christians is correct – the world will end.  Many people around the country recently have enjoyed a good laugh when reading accounts of the gullible faithful few who believe this prediction that the world will end later today: after all, evidence for this prediction is utterly lacking.

Yet letter writers in today's (final?) edition of your paper are as certain that the world will soon crash and burn because of population growth as the May 21st doomsters are certain that the world will crash and burn because of Biblical prophesy.  And just as for the prediction of the world ending on May 21, 2011, evidence for population growth causing a catastrophe for humanity is utterly lacking.

Are humans today who live on densely populated continents (such as Europe) poorer, less healthy, and suffering shorter life-expectancies than are humans today who live on sparsely populated continents (such as Africa)?  No; quite the opposite.  Are humans today who live in densely populated urban areas generally poorer, less healthy, and suffering shorter life-expectancies than are humans today who live in sparsely populated rural areas?  No; quite the opposite.  Has human wealth, health, and life-expectancy worsened as population grew dramatically over the past two centuries?  No; these have improved dramatically.

So in light of this overwhelming evidence that growing population and greater population densities are positively associated with improvements in the human condition, why suppose that growing population nevertheless is a "bomb" destined to explode and hurl us into hell for our sinful refusal to follow the teachings of wild-eyed preachers such as Paul Ehrlich and Lester Brown?  Theirs is a fact-immune religious creed that I thoroughly reject.

Sincerely,

Donald J. Boudreaux

Beware of Celebrating Decreases in the Current-Account Deficit

Keynesians – or, more generally, economists obsessed with aggregate demand – are fond of exports because foreigners' expenditures on exports are demand for 'our' country's goods and services.  Aggregate-demand-obsessed economists also dislike imports because 'our' consumers' expenditures on imports is demand, not for output produced at home but, rather, for output produced abroad.  Unless that 'demand' returns to the home economy in the form of foreigners' demand for 'our' exports, then aggregate-demand-obsessed economists are unhappy because the sum of C+I+G+[Xports-Mports] goes down.

This obsession with aggregate demand leads to a special fear of trade deficits because, by definition, a trade deficit occurs whenever Mports > Xports.  The term in the bracket (in the equation above) is negative!  Aggregate demand is less than C+I+G.

But not so fast….

Suppose this year Americans spend a total of $1M on imports.  Foreigners, in turn, immediately spend this entire $1M buying Texas land from a Texan living in Texas.  Mr. Texan then spends the entire $1M of his land-sale proceeds buying South Carolina peaches, California wines, Massachusetts web-designs, and oodles of other American-made (and only American-made) goods and services.  In this case, America will run a $1M trade deficit, but C will, as a result, rise by exactly the same amount that (X-M) falls: by $1M.

Now consider a second scenario.  As before, Americans this year spend $1M on imports, but now foreigners spend this entire $1M buying American exports.  America, in this second scenario, runs no trade deficit.  Unlike before, C doesn't rise; but also unlike before (X-M) doesn't fall by $1M.

The total dollar value of C+I+G+[X-M] is the same in the second scenario as it is in the first.

Even within the excessively simplistic C+I+G+[X-M] framework, therefore, the issue of trade deficits misleads.  Even if all you care about is aggregate demand, then you should still be aware that a current-account (or 'trade') deficit is not necessarily a 'leakage' of aggregate demand from the domestic economy.

Therefore – and this point gets to the little debate that I had with Pingry in the comments section of this earlier post – a change in the trade deficit, by itself, tells you nothing of the larger picture; it tells you nothing about what's happening to aggregate demand.

Perhaps a lower trade deficit results in higher aggregate demand, but – as the two altnerative scenarios above show – this relationship is hardly necessary.  In the second of the above scenarios, the trade deficit is lower than in the first scenario by $1M – indeed, in the second scenario, trade is "balanced."  But aggregate demand in the second scenario is neither higher nor lower than it is in the first scenario.

So Paul Krugman's celebration of a falling manufactured-goods trade deficit (even if we follow Pingry's interpretation of this celebration as being, really, a celebration of a falling trade deficit more generally rather than being a Donald-Trumpian celebration of the 'return' of American manufacturing) is inappropriate.  How does Krugman know that the higher demand for American exports results in higher aggregate demand for the American economy?  He doesn't know.  He can't possibly know.

Indeed, in today world of national currencies foreigners who sell things ("imports") to Americans but who do not buy (as many) things ("exports") from Americans are likely investing in dollar-denominated assets whatever dollars they don't spend on American exports.  This fact means that much, if not all, of America's trade deficit manifests itself in America as investment spending.

So to the extent that investment spending in America today is composed of dollars that foreigners could but don't use to purchase American exports, a decrease in America's trade deficit tomorrow might not increase aggregate demand in the U.S. even if it does increase demand for goods and services recorded in America's current account.

Calling Dr. Krugman….

Here's another letter to the New York Times on Paul Krugman's especially, appallingly, and excruciatingly bad column today:

Paul Krugman writes that "Crucially, the manufacturing trade deficit seems to be coming down" ("Making Things in America," May 20).

Why is this fact "crucial"?  A dollar's worth of exported services buys just as many imports – one dollar's worth – as does a dollar's worth of exported manufactured goods.  Mr. Krugman, a trade specialist, should recognize this reality.

Suppose that for decades the annual value of American exports of things-bigger-than-a-breadbox exceeded the annual value of American imports of things-bigger-than-a-breadbox.  Suppose also that a recent technological advance prompts Americans to specialize much more heavily in the production of things smaller than a breadbox.  It's likely that, as a result, the number of Americans employed building things bigger than a breadbox falls and America starts to run annual bigger-than-a-breadbox-things trade deficits.  Would Mr. Krugman worry?  And would he applaud when some subsequent economic or policy change causes America's bigger-than-a-breadbox-things trade deficit to 'come down'?

Surely not.  So why does this Nobel laureate economist lend credence to the popular myth that there's something economically special and worthwhile about value exported in the form of manufactured goods as opposed to value exported in some form – such as services – other than manufactured goods?

Sincerely,

Donald J. Boudreaux

It's a shame that a Nobel laureate economist has contorted his economics so badly that it now sounds very much like the nonsense bellowed by the likes of Donald Trump and Charles Schumer.  (If only Mr. Krugman would read a book by Dr. Krugman entitled Pop Internationalism; he'd learn much.)